Credit Suisse Takeover: UBS acquires Credit Suisse

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Credit Suisse, one of the world’s largest wealth managers and a global systemically important bank, has been taken over by its rival UBS for 3 billion Swiss francs ($3.2 billion) in stock. The deal was announced on Sunday, March 19, 2023, after a weekend of frantic negotiations between the two banks, the Swiss authorities, and regulators from other countries.

The takeover was engineered by the Swiss government and central bank to prevent a catastrophic banking collapse that could have threatened the global financial system. Credit Suisse had been facing a liquidity crisis after being hit by a series of scandals and losses in recent years. The bank’s troubles worsened after two US lenders, Silicon Valley Bank, and Signature Bank, collapsed earlier this month, triggering a wave of withdrawals and panic among Credit Suisse’s clients.

To avoid a bank run and ensure financial stability, the Swiss National Bank (SNB) provided emergency liquidity to Credit Suisse and agreed to offer $108 billion in liquidity assistance to UBS as part of the deal. The Swiss government also agreed to absorb up to $9.7 billion in potential losses from certain assets held by Credit Suisse. The deal will result in 9,000 job cuts and significant overlaps between the two lenders.

The terms of the deal will see Credit Suisse shareholders receive 1 UBS share for every 22.48 Credit Suisse shares they hold. This values Credit Suisse at $0.76 per share, well below its $1.86 closing price on Friday. The deal also implies a complete write-down of Credit Suisse’s riskiest bonds, known as AT1s, worth $17 billion.

The takeover was controversially pushed through by bypassing normal corporate governance rules and sidelining major Credit Suisse shareholders, including the Saudi National Bank and the Qatar Investment Authority, which had invested billions into the bank last year.

The deal marks the end of an era for Credit Suisse, which was founded in 1856 and had grown into one of Switzerland’s most prestigious banks with operations in more than 50 countries. It also creates a new banking giant with $5 trillion of invested assets under UBS’s umbrella.

The merger is expected to bring some benefits for both banks, such as cost savings, synergies and increased market share in wealth management and investment banking. However, it also poses some challenges and risks for UBS shareholders who will have to bear some losses from Credit Suisse’s troubled portfolio.

The takeover also raises questions about the future of banking regulation and competition in Switzerland and beyond. Some analysts have warned that the merger could reduce innovation and diversity in the sector while increasing systemic risk.

The deal is subject to regulatory approvals from various jurisdictions where both banks operate. It is expected to be completed by mid-2024.






Also read: UBS Buys Credit Suisse for $3.2 Billion

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